SMEs Making Profit in Economic Slowdown

While IT biggies like TCS, Infosys, Wipro etc. may face depressed profit margins in the wake of the recession, smaller IT firms and freelancers are on their way to become millionaires thanks to the online services market

The economic slowdown is repeating itself in the U.S. now, and companies are in the process of chopping off hundreds of jobs and cutting down employee salaries. Case in point – recent job cuts by IBM and TCS. TCS reportedly sacked over 500 employees, citing poor performance, and IBM is believed to have shown the door to more than 1,500 employees.

So, before any further frenzied move, many techies are quitting jobs to turn entrepreneurs in the hope to become freelance IT millionaires. And in this situation, the virtual work places like Elance.com, Rent-A-Coder, oDesk and GetAFreelancer.com, come to their rescue.

“We began our outsourcing business in 1998. We joined Elance in 2000 after we lost our main customer, 3COM, due to the recession in the U.S.,” commented Yuriy Bannov, founder and co-owner of Sibers, a programming and web development company located in Siberia. “At that time there were just five of us.” The company has completed over $1.1 million in Elance projects.

Xicom, Synapse, Transform are some the clients of Elance who have earned $2 million, $3 million and $450,000 respectively till date. In 2007, Elance had 150,000 projects posted worth $75 million and a million registered users.

“Small businesses are an important and growing driver of the U.S. economic growth and dynamism,” said Fabio Rosati, CEO, Elance.com. “As the costs associated with doing business globally continue to decrease, small businesses will make no distinction between domestic and international commerce.”

In a slow economic condition, opportunities are abound for such freelance contractors. Small and mid-sized businesses and individuals also prefer outsourcing work like designing a logo, website, maintenance of applications or websites and designing works, through such platforms.

The reasons are simple — there are no large companies willing to take small outsourcing tasks worth $2,000, $5,000 or $10,000. The other reasons are the rising rupee — which is forcing large and mid-sized companies to increase their billing rates to protect margins. Slowdown in hiring and salary hikes due to a slowdown in contracting of large projects is also a reason.

By Adyasha Sinha, Global Services